Constitutional expert says Kinder Morgan has law on its side, but industry says Trudeau has to ‘step up’

Dispute between Kinder Morgan, Horgan govt, City of Burnaby is a log jam and only Prime Minister Trudeau can break it…but how?

How should the Canadian government and Prime Minister Justin Trudeau respond to the BC government’s latest challenge to federal authority over the Trans Mountain Expansion project? I reached out to two experts for an answer. Their responses are best described as the legal vs. the corporate views on the current jurisdictional battle over the pipeline.

Prof. James Coleman teaches energy and environmental law at the Dedman School of Law, Southern Methodist University in Texas, but until recently was on the faculty of the University of Calgary. Readers will recognize him as a frequent source as I’ve worked my way through the knotty issue of constitutional jurisdiction over pipelines.

Prof. James Coleman, Dedman School of Law, Southern Methodist University.

To sum up, the federal government has complete authority over all aspects of approval and regulation of inter-provincial pipelines, like TMX, but junior governments have minor permitting responsibilities that, thanks to the principle of paramountcy, cannot encroach upon Canada’s authority.

That doesn’t mean the provinces are completely without tools to hinder and delay proponent Kinder Morgan’s construction plans, which called for a Sept. start that has now been pushed back a year because of Burnaby’s foot dragging over brush clearing permits and a re-zoning application.

I asked Prof. Coleman if the BC government’s announcement that it intends to consult British Columbians about new pipeline regulations that include restricting diluted bitumen transportation is a qualitatively different kind of obstruction to the project than the permitting dispute?

“The main thing that the National Energy Board can do is what it’s already doing, which is establishing some sort of more streamlined permitting process that is going to allow the NEB and Kinder Morgan to deal with these issues as they come up,” he said in an interview.

“The NEB has said it’s willing to speed up these [permitting] processes a little bit, but maybe not as much as the company was looking for. I think balance will be the important issue going forward. A key question is whether it stays the course or whether it even does more to speed up that permitting process.”

Coleman says there is an important difference between the potential provincial restrictions on shipping and municipal permits – the former can be ignored, while the latter are required before construction can start.

“Kinder Morgan does need local permits, as well as provincial permits to develop some of the facilities,” he said. “If there is some new legislation that says you can’t transport dilbit, Kinder Morgan may feel more comfortable just ignoring that and saying, ‘There’s no way you can just enforce such a law against us.'”

Coleman says that if the Horgan Government continues to frustrate federal authority by imposing unreasonable restrictions on the Trans Mountain Expansion project, Kinder Morgan can apply to the NEB to get whatever approvals or permits it might need.

Dennis McConaghy.

But Dennis McConaghy says that navigating the time-consuming and cumbersome NEB process adds cost to the project that in very short order could become too onerous, as Kinder Morgan has already hinted.

“My greatest concern at this point is that the Kinder organization simply gives up in the face of yet another intervention by a government aligned with the Canadian environmental movement to thwart this project regardless of the TMX expansion project having already gained federal approval,” the former TransCanada VP, who was once in charge of the Keystone XL project, said in an email.

“How much financial exposure can it endure while legal adjudications play out? How can it rationalize ramping up spending to commence construction? How much future risk will it have to endure, even if it believes that ultimately it will prevail? These are real issues that are immediately in play.”

McConaghy agrees with my argument in yesterday’s column that Prime Minister Trudeau must put Premier Horgan on notice that federal approval of TMX will not be thwarted.

“Federal jurisdiction as applied by the NEB is more than sufficient to ensure all Canadians that any spill risk is adequately mitigated and appropriate remediation and emergency response commitments are in place,” he said.

Should the conflict between federal and provincial jurisdiction be expedited to a hearing before the Supreme Court of Canada to settle the issue once and for all?

“Ultimately we might need the Supreme Court of Canada to tell us if they want to move away from those older decisions, which are pretty clear that the federal government has paramountcy over inter-provincial pipelines. If Canada’s going to move to a model of overlapping jurisdiction, yeah, we’d probably have to hear that from the Supreme Court,” he said.

“There are some reasons that you could imagine that happening, whether it’s the idea of co-operative federalism that’s developed or if it’s just something about pipeline politics and people feel there is this nation-wide movement and provinces should have a bigger role to play in the issue.”

But Coleman also cautions that both sides could have something to lose if the dispute ends up in the Supreme Court: industry already has the Constitution on its side and will not want to open up that advantage to interpretation or dilution, and the province would risk having the highest court in the land re-affirm exclusive federal jurisdiction.

There is no easy answer. Pipeline opponents are refusing to budge, with provincial and local governments gearing up for a long-term battle. The Canadian pipeline system is already constrained, with oil companies losing hundreds of millions of dollars as the discount they receive from American customers grows and grows, leaving industry desperate for a resolution. And the Prime Minister has been backed into a corner partly of his own making and cannot allow federal authority to be flaunted.

McConaghy says the answer is that “Trudeau needs to step up and dispel the risks that Tuesday’s created by BC’s intervention.”

The question to be answered is, What does it mean for the Prime Minister to “step up”?